Rates Continue To Flatline As Trade And Impeachment Remain In The Headlines

MBS prices started lower this morning while the bellwether 10 yr was unchanged from yesterday at 1.89%. MBS prices at 9:00 am EST -12 bps from yesterday’s close.

Weekly MBA mortgage applications last week; -5.0%, purchases -2.0% while refinances -7.0%. There are no other economic releases today.

The House will vote on the two articles of impeachment sometime today, likely later this afternoon or early evening. According to current news, the articles won’t be sent to the Senate today. The House will debate for six hours before holding separate votes on the two impeachment articles. Nancy Pelosi and the Judiciary Committee officially release on Wednesday the names of the proposed Democratic House managers who will prosecute the case in the upcoming Senate trial. The House isn’t expected to be in session on Friday, but an official familiar with the matter wouldn’t say if those issues would be resolved Thursday.

Reuters is reporting that JPMorgan sees an “uncomfortably high” 25% chance that Britain’s Brexit transition period will end in a ‘no-deal’ scenario when the deadline to strike a trade deal with the European Union ends in Dec. 2020. “We have put the risk of a “no-deal” end to the transition at 25%, a number we regard as uncomfortably high. The negotiation process is path-dependent, and we could find ourselves on that path even though neither negotiating views it as their first preference”. The UK will officially exit the EU early next year.

Fitch noted that the Phase One deal with China is unlikely to alleviate trade-related uncertainty or restore confidence among businesses. We continue to think that trade with China will be a long ongoing issue with differences cropping up regularly that will have to be settled with negotiations.

Euro economic data on PPI and CPI: Eurozone’s November CPI decreased 0.3% m/m, as expected (last 0.1%) but rose 1.0% yr/yr, as expected (last 0.7%). November Core CPI decreased 0.5% m/m, as expected (last -0.5%) but rose 1.3% yr/yr, as expected (last 1.1%). October Construction Output decreased 1.0% m/m (last 1.1%). Germany’s November PPI was unchanged m/m (expected 0.1%; last -0.2%), falling 0.7% yr/yr (expected -0.6%; last -0.6%).

The 10 yr pushing against 1.90%, crucial support in our technical analysis. At 10:00 am EST, its rate is at 1.90%. Presently there isn’t any domestic or geopolitical reason for long term interest rate to decline…no need for safety and the Fed done lowering rates.

Source: TBWS